Minimum Energy Efficiency Standards (MEES) for Landlords
In 2016, The Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 established the new Minimum Energy Efficiency Standards (MEES) in the residential and commercial private rented sector.
This has been introduced by government to improve the quality of private rented buildings and reduce the overall CO2 emissions in accordance with the UKs targets for decarbonisation. From 1st April 2018, phase one of the MEES regulations came into force which has big implications for landlords of private rented property. As a result of this, it is now deemed unlawful to let properties with an Energy Performance Certificate (EPC) rating below an 'E' rating.
MHCLG previously highlighted the scale of those affected by MEES, with 20%-25% of residential and commercial properties in England and Wales hitting or falling below the minimum standards. There is also a chance that the standard could be raised further to a D rating by 2025 and a C rating by 2030.
Landlords and their agents should act by commissioning an up-to-date Energy Performance Certificate which will identify the current rating (which may have changed over time), and recommend opportunities for improvement.
What does this mean for Domestic/Residential Landlords?
From the 1st April 2018 all private rented properties must achieve an energy efficiency rating of at least an E on their EPC, to meet the minimum standards. This will initially only apply upon the granting of a new tenancy to a new or existing tenant.
Landlords will need to take action to avoid any non-compliance penalties (estimated at £5000) and protect the value of their assets. If a property does not meet the minimum standards, it will be deemed unlawful for landlords to let or market their property.
What does this mean for Non-Domestic/Commercial Landlords?
From the 1st April 2018, it is now unlawful to grant a new lease for properties in England and Wales which do not meet the Minimum Energy Effciency Standards (MEES). The regulation also applies to lease renewals.
It is important to act quickly to ensure your property complies as the valuations of properties not meeting the standards are now likely to be affected, as their marketability will be diminished. Moreover, financial penalties for non compliance are linked to the rateable value of the propert, but could be as much as £150,000
The Department for Business, Energy & Industrial (BEIS) consulted on amendments to the existing domestic MEES regulations, which considered introducing a cost-cap for energy efficiency improvements for domestic landlords. In November 2018, they concluded that landlords will be required to fund improvements to properties with the introduction of a capped landlord contribution of £3,500 (Inclusive of VAT).
Subject to timely Parliamentary approval, the amended regulations will be implemented as follows:
- Introduction of a landlord financial contribution with the contribution capped at £3,500 (incl VAT)
- Any investment in energy efficiency made since October 2017 to be counted within the cap
- Any available third-party funding, including Green Deal finance and local authority grant funding, to be counted within the cap;
- a new ‘high cost’ exemption to be available where a substandard property cannot be improved to E for £3,500 or less, and require the submission of three installer quotes where a landlord is registering such a ‘high cost’ exemption
- Remove the current ‘no cost to the landlord’ provision, and curtail existing ‘no cost’ exemptions so that they will end on a planned date of April 2020;
- Remove the consent exemption currently available under Regulation 31(1)(a)(ii) where a tenant has withheld consent to a Green Deal finance plan;
- Upon enactment, the amended regulations will apply upon the granting of:
a) a new tenancy to a new tenant, and,
b) a new tenancy to an existing tenant
- From 2020, the amended regulations will apply to all privately rented property in scope of the regulations, in line with the existing regulatory ‘backstop’ date.
More information is available here.
Landlords can register an exemption in order to remain compliant with MEES regulation, despite their property not meeting the standards. All exemptions last 5 years except the exemption: recently becoming a landlord, which lasts for only 6 months. Unlike an EPC that stays with a property, an exemption does not. It is linked to the landlord who registered the exemption, so if a new landlord comes into the property, they will need to re-register the exemption.
All exemptions for both Domestic and Non-Domestic properties can be registered at the following website: https://prsregister.beis.gov.uk
The key dates provided below underline when the regulations will be enforced, with the regulation scope expanding over a five year period from 2018 to 2023.
1st April 2018
it is now unlawful to grant new leases for residential or commercial property with an EPC rating below an 'E'
1st April 2020
MEES regulation will extend to ALL residential privately rented property which are required to have an EPC.
1st April 2023
MEES regulation will be extended to include ALL existing commercial leases.
The Deregulation Act 2015 protects tenants against unfair eviction where they have raised a legitimate complaint about the condition of their home. This includes issues about its energy efficiency.
Legislation will also affect a landlords right to evict a tenant who has a legitimate complaint concerning the buildings energy efficiency compliance. Shorthold tenancies granted on or after 1st October 2015 are subject to new rules brought about by Section 33 of the Deregulation Act.
The rules are designed to prevent ‘retaliatory eviction’ practices and effectively make it more difficult for landlords to serve
a section 21 eviction notice to tenants where complaints have been raised about the condition of the property. This would include complaints about its energy efficiency.
What does this mean for Landlords?
Before serving a section 21 notice you must demonstrate that you have complied with the relevant legal obligations concerning:
• The condition of the dwelling
• The health and safety of occupiers in the dwelling
• The energy performance of the dwelling
• Gas certification
• All the above information has been provided to the tenants.
As such, if you have not provided your tenant with an EPC, you will risk losing the right to issue an eviction notice.